Increasing Student Debt
With tuition prices continuing to increase each year, it’s no surprise that the amount of student debt that therapists are graduating with continues to rise as well. I talk to students and new grads every day through my site that are upset about the logistics involved with paying off six-figure student loan debt, while also doing their best to build a life after grad school. Some services, such as Fitbux, offer assistance with determining a plan to handle this debt as a new grad. Fitbux is a wonderful resource for developing the most optimal plan for getting to the zero debt finish line, and having a plan is a vital part of the process. But besides having a sound financial plan, another vital aspect is optimizing income. There are many ways to increase your income when coming out of school, including working multiple jobs or opening your own cash-based practice, but in my opinion, the easiest (and most fun) path to financial freedom is pursuing travel therapy contracts.
Financial Power of Travel PT
I began my travel therapy career directly out of school as a new grad three years ago, and this decision has provided me an immense amount of financial flexibility as well as an exciting lifestyle! As a new grad travel therapist, I was able to make twice as much starting out as some of my classmates taking permanent positions. The extra money earned from travel contracts, combined with keeping my expenses low while traveling around the country, led to me being able to save over $100,000 in 1.5 years after graduation. With this amount of savings, my student loans could have been completely eliminated during that time. Keep reading to find out what I did instead.
Flexibility in Student Loan Repayment
In addition to earning extra income, an often overlooked benefit of travel therapy is that it gives you more flexibility with the inevitable student loan payments. Many travelers choose to aggressively pay off their loans in the first couple of years out of school, like I could have done, which puts them in a great financial position. Others choose to go on the standard 10-year repayment plan while saving the additional money earned for other endeavors such as a downpayment on a home or for personal and family expenses. More may take a completely different route, like I've done, which is to choose an income-driven repayment option. With this option, I pay the minimum required each month on my income-driven repayment plan, while investing all leftover money each month into more profitable assets. I believe this is the best option since a big benefit of being a traveler is the tax-free stipend involved with maintaining a tax home and taking travel assignments. The stipends, in essence, increase your total yearly compensation while not increasing your taxable income, and therefore increasing your Adjusted Gross Income (AGI), which is what is used to determine your monthly income driven payment.
This already low payment can be reduced even further if the traveler is taking advantage of investing money in their traditional retirement account options, which also reduce your AGI. I have talked to fellow travelers who have been able to achieve a $0 monthly student loan payment this way. Currently under the REPAYE plan (one of the income-driven repayment options) half of each month’s accrued interest is forgiven, and this is a very powerful thing for someone with a high student loan balance and a very low (or $0) monthly payment. With this plan, the “effective interest rate” is basically cut in half, meaning that if your average interest rate is 6%, interest is now only accruing at around 3% each month. Therefore, if you are investing the extra money that you’re saving in retirement and taxable accounts with smart allocation, your returns from the stock market will almost certainly exceed the student loan interest rate over the long term.
Financial Freedom Equals Lifestyle Freedom
Having a low monthly student loan payment, combined with invested money earning consistent returns in the form of dividends and appreciation, is a recipe for financial and lifestyle freedom. In my first three years out of school working hard as a traveling therapist and investing heavily, I now have the financial stability and security to pursue other interests in addition to working as a PT. For me, this is expressed as working only three months per year for the foreseeable future, while spending the other nine months traveling both internationally and domestically. Travel therapy and generally managing my personal finances have certainly been the keystone in achieving this “semi-retirement” so early in my career. You can check out NewGradPhysicalTherapy's Ultimate Guide to Personal Finance for some extra tips! However, for others, it could be expressed in a variety of ways, whether that's having more time to spend with their family by working part-time or PRN, being able to take more vacation time intermittently, or being able to retire earlier than traditional “retirement age.”
Travel PT: The Path to Financial Freedom
Travel therapy is a powerful way for new grad physical therapists to make significant progress toward paying down debt and getting on the path to financial freedom in a short amount of time. This independence can be used to reduce stress and potential burnout by working fewer hours per week or fewer weeks per year, which I have been able to take advantage of while going this route. Having a lower taxable income as a travel therapist also allows for flexibility with how you choose to pay off your student debt, which can lead to further financial freedom early in your career. This can be infinitely valuable depending on your situation. Traveling as a new grad physical therapist isn’t for everyone, but I believe that for the majority it can be a viable option with proper planning and professional growth prior to graduation.